Germany, jostling with Airbus SAS over financing the A400M military plane, said governments may commit 2 billion euros ($2.8 billion) in extra funding at most, less than a third of the sum Airbus is seeking.
The governments’ offer falls short of the 6.4 billion euros demanded by executives from Airbus and its parent, European Aeronautic, Defence & Space Co., in Berlin talks this week, according to the German parliament’s daily bulletin. The company request comes on top of 20 billion euros in fixed costs agreed for delivery of 180 planes, the bulletin said.
The EADS demand is “without foundation,” the bulletin cited government officials including Defense Minister Karl- Theodor zu Guttenberg as telling a closed-doors meeting of the budget committee in Berlin. Guttenberg is willing to continue negotiations because the plane is “without alternative,” the bulletin cited him as saying.
Germany, the U.K. and France are among seven governments seeking to bridge an impasse in talks with EADS and its Airbus SAS unit over financing the A400M, Europe’s biggest defense project. Government negotiators are ready to go beyond a Jan. 31 deadline for concluding talks on the delayed military transport plane as long as EADS makes a new offer, the report said.
Two Weeks
A “result” is expected within two weeks, the bulletin said. The next meeting of both sides is scheduled for Feb. 2 in Berlin, a spokesman for the German Defense Ministry said.
“Talks could conclude with the seven nations together offering 2 billion euros,” the bulletin said. The other A400M clients are Turkey, Spain, Belgium and Luxemburg. Germany has the biggest order, for 60 units.
EADS spokesman Pierre Bayle declined to comment because negotiations continue.
EADS bases its demand on 5.2 billion euros in extra costs plus 2 billion euros to offset inflation, minus 800 million euros in “savings,” the bulletin said.
Airbus Chief Executive Officer Thomas Enders has said the company is ready to withdraw from the A400M project in view of rising costs. EADS concluded a fixed-price contract for the planes in 2003.
The seven nations’ offer to EADS would not in Germany’s case cost taxpayers extra money, the Defense Ministry told lawmakers, the bulletin said.
A 900 million-euro provision for inflation exists in the original contract, a figure partner nations may be prepared to top up to 2 billion euros, German newspaper Handelsblatt reported today.
Downgrade ‘Possibility’
Ratings company Fitch said that it expects the seven nations and EADS to reach a cost-sharing agreement. While the likelihood of cancellation may be low, a downgrade of the company’s BBB+ rating would be a “distinct possibility” if EADS were forced to repay the 6.4 billion euros alone, Fitch said today in a note.
Lawmakers from Chancellor Angela Merkel’s coalition of the Christian Democrats, the Christian Social Union and the Free Democrats yesterday defeated a motion in parliament by the opposition Green Party to cancel the order.
The first A400M took its maiden last month in Seville, southern Spain. The countries need the plane as they rely on ageing army transports to sustain their military and humanitarian missions. The A400M, which can transport troops and material, was originally set for first delivery last year. The project already employs more than 10,000 people, a workforce that may swell to more than 40,000 under full production.